Clients regularly ask what the difference is between a revocable and an irrevocable trust. By definition, an irrevocable trust cannot be amended, modified, changed, revoked, or terminated. Prior to 2016, Minnesota law did not provide guidance to probate courts for modifying or terminating irrevocable trusts. However, in 2016 Minnesota adopted the Minnesota Trust Code granting probate courts the authority to alter noncharitable irrevocable trusts in specific circumstances.
Minn. Stat. §§ 501C.0410 – 501C.0417 provides eight different sets of circumstances in which Minnesota probate courts have authority to modify or terminate a noncharitable irrevocable trust. They are:
Consent of the settlor and all beneficiaries
Consent of all beneficiaries
Inability to administer a trust effectively
Noneconomic trusts (costs of administration not justified by value of the trust property)
Correction of mistake of fact or law
Achievement of settlor's tax objectives
Combination or division of trusts
Despite Minnesota law allowing for modification and termination, Minnesotans should be warned that doing so can become highly litigious and expensive. An order from a probate judge is required which means a legal action must be commenced and a judge must rule in favor or the termination or modification before it can be done. Further, there is never a guarantee that “all beneficiaries” will be on the same page. People are funny when it comes to their inheritance. The decision to create an irrevocable trust is a difficult one which can bring arouse difficult and costly consequences if not guided by and drafted by an experienced estate attorney specializing in protecting inheritances.
Lisa Haster works with trustees, settlors and beneficiaries to assist in navigating through trusts and estate matters. Lisa focuses on keeping her clients’ estates out of probate court. call Minneapolis-based Metropolitan Law Group PA at (612) 524-9414 to meet with Attorney Lisa Haster. Lisa is the founder of Twin Cities’ Metropolitan Law Group PA, JDsync syncing attorneys with support virtually and is a best-selling author.